Abstract
One of the most important tasks of corporate financial management is to assure the efficiency of investment decisions (Ryan and Ryan 2002 Dutta and Fan 2009). In corporate practice it can be observed that departments are often endowed with decision making authority regarding their investments. This is due to rapidly changing markets, products, and technologies, and decentral managers who are usually better informed with respect to these volatile economic circumstances (Schuster and Clarke 2010).
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Notes
- 1.
As each department is involved in exactly one investment project, we can suppress the notion of j.
- 2.
This is the core of the coordination mechanism: the capital charge rate is located below the project’s internal rate of return only for the winning project. For all other projects, the hurdle rate is higher than the projects’ internal rates of return, which—upon realization—would result in negative NPVs (Baldenius et al. 2007; Leitner and Behrens 2013, 2014).
- 3.
In every t, residual income results in \(v_{\mathit{ijt}} = x_{\mathit{ijt}} \cdot \rho _{i} -\lambda _{\mathit{ij}} \cdot \kappa _{j} \cdot \frac{x_{\mathit{it}}} {\mathbf{r}(r_{i}^{{\ast}})\circ \mathbf{x}_{i}}\). This performance measure reduces to \(v_{\mathit{ijt}} =\kappa _{j} \cdot \left (\rho _{i} -\rho _{i}^{{\ast}}\right )\) and, thus, fulfills strong incentive compatibility (cf. also Baldenius et al. 2007).
- 4.
Using Matlab©’s function ‘portsim.m’.
- 5.
Based on the performance measure v it , see Sect. 2.
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Leitner, S., Brauneis, A., Rausch, A. (2015). Does Collaboration Pay? An Investigation for the Domain of Distributed Investment Decisions. In: Amblard, F., Miguel, F., Blanchet, A., Gaudou, B. (eds) Advances in Artificial Economics. Lecture Notes in Economics and Mathematical Systems, vol 676. Springer, Cham. https://doi.org/10.1007/978-3-319-09578-3_1
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